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Courtroom drama could alter Hispanic TV programming

01:00 AM EST on Tuesday, January 6, 2009

By RYAN NAKASHIMA

Associated Press

LOS ANGELES — In a trial that could change the landscape of Hispanic television in the United States, broadcasting giant Univision Communications Inc., which is primarily owned by Providence-based Providence Equity Partners, squares off today against the supplier of its popular telenovelas, Grupo Televisa SA.

The courtroom battle, brewing since 2005, has taken on the tinge of a romantic drama. Televisa is playing the role of the spurned suitor seeking justice, while Univision is trying to keep a financially successful, if unhappy, marriage intact.

Televisa, the dominant Mexican producer of Spanish-language dramas, alleges that Univision wrongly excluded certain programs from the deal that called for Univision to share its advertising revenue with Televisa, even from shows that weren’t made by Televisa. The 25-year agreement was set to continue through 2017.

As the charges and countercharges escalated over the years, the dispute has evolved to threaten Univision’s bedrock of programming — the three hours of Televisa-made soap operas that air five nights a week — and have cemented Univision at number-one among U.S. Hispanic audiences.

If Televisa’s arguments — that Univision committed a material breach of contract — are proved at the jury trial starting today, the company intends to cut its ties and take its programming elsewhere.

Such a move could cripple New York-based Univision, which has $10.8 billion in debt, much of it created in 2006 in a leveraged buyout by Providence Equity, at a time when even advertising for the growing Hispanic market is slumping.

“If Televisa wins, overnight it changes the Spanish-language television landscape as we know it today,” said Jose Cancela, a Coral Gables, Fla.-based marketing consultant and author of The Power of Business en Espanol.

“This source of programming that Televisa provides gives Univision a dominant position in the marketplace,” Cancela said. “If they were to lose that or it unravels, it has a huge implication for their financial circumstances.”

When the lawsuit was first filed in 2005, it was just about recouping payments Mexico City-based Televisa said it was owed. But Televisa raised the legal stakes by alleging a material breach of contract, which would allow it to cancel the deal entirely.

Televisa made this move around the time Univision declared that it was for sale in February 2006. At the time, Televisa owned 11 percent of Univision and was trying to take it over. Univision argued that Televisa’s breach-of-contract claim was designed to scare off other suitors, a poison pill that would leave potential Univision buyers with a hollowed prime-time lineup.

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